UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended March 31, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-12431
COLUMBIA FUTURES FUND .
(Exact name of registrant as specified in its charter)
New York 13-3103617
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
c/o Demeter Management Corporation
Two World Trade Center, 62 Fl., New York, NY 10048
(Address of principal executive offices) (Zip
Code)
Registrant's telephone number, including area code (212) 392-5454
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
<PAGE>
<TABLE>
COLUMBIA FUTURES FUND
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 1999
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Statements of Financial Condition
March 31, 1999 (Unaudited) and December 31, 1998........2
Statements of Operations for the Quarters Ended
March 31, 1999 and 1998 (Unaudited).....................3
Statements of Changes in Partners' Capital for
the Quarters Ended March 31, 1999 and 1998
(Unaudited).............................................4
Statements of Cash Flows for the Quarters Ended
March 31, 1999 and 1998 (Unaudited).....................5
Notes to Financial Statements (Unaudited)............6-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations.......................................11-17
Item 3. Quantitative and Qualitative Disclosures about
Market Risk . . . . . . . . . . . . . . . . . . 17-28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................ 29
Item 6. Exhibits and Reports on Form 8-K....................
29
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COLUMBIA FUTURES FUND
STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
March 31, December 31,
1999 1998
$ $
(Unaudited)
ASSETS
<S>
<C> <C>
Equity in futures interests trading accounts:
Cash 9,532,227 9,719,676
Net unrealized gain on open contracts 385,047 499,104
Total Trading Equity 9,917,274 10,218,780
Interest receivable (DWR) 30,669 29,902
Total Assets 9,947,943 10,248,682
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable 226,785 15,855
Administrative expenses payable 63,254 54,390
Accrued management fee 32,839 33,868
Total Liabilities 322,878 104,113
Partners' Capital
Limited Partners (2,954.763 and
3,099.179 Units, respectively) 9,309,981 9,827,470
General Partner (100 Units) 315,084 317,099
Total Partners' Capital 9,625,065 10,144,569
Total Liabilities and Partners' Capital 9,947,943 10,248,682
NET ASSET VALUE PER UNIT 3,150.84 3,170.99
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
COLUMBIA FUTURES FUND
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1999 1998
$ $
REVENUES
<S> <C> <C>
Trading profit (loss):
Realized 170,922 (40,328)
Net change in unrealized (114,057) (309,154)
Total Trading Results 56,865 (349,482)
Interest Income (DWR) 88,751 95,424
Total Revenues 145,616 (254,058)
EXPENSES
Management fee 98,901 91,244
Brokerage commissions (DWR) 90,088 76,607
Administrative expenses 17,000 20,000
Transaction fees and costs 6,031 5,781
Total Expenses 212,020 193,632
NET LOSS (66,404) (447,690)
NET LOSS ALLOCATION
Limited Partners (64,389) (434,275)
General Partner (2,015) (13,415)
NET LOSS PER UNIT
Limited Partners (20.15) (134.15)
General Partner (20.15) (134.15)
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
COLUMBIA FUTURES FUND
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Quarters Ended March 31, 1999 and 1998
(Unaudited)
<CAPTION>
Units of
Partnership Limited General
Interest Partners Partner Total
<S> <C> <C> <C>
<C>
Partners' Capital,
December 31, 1997 3,342.046 $9,177,928 $283,091 $9,461,019
Net Loss - (434,275) (13,415) (447,690)
Redemptions (35.487) (96,338) -
(96,338)
Partners' Capital,
March 31, 1998 3,306.559 $8,647,315 $269,676 $8,916
,991
Partners' Capital,
December 31, 1998 3,199.179 $9,827,470 $317,099 $10,144,
569
Net Loss - (64,389) (2,015) (66,404)
Redemptions (144.416) (453,100) -
(453,100)
Partners' Capital,
March 31, 1999 3,054.763 $9,309,981 $315,084 $9,625,0
65
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<TABLE>
COLUMBIA FUTURES FUND
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Quarters Ended March 31,
1999 1998
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss (66,404) (447,690)
Noncash item included in net loss:
Net change in unrealized 114,057 309,154
(Increase) decrease in operating assets:
Interest receivable (DWR) (767) 2,516
Due from DWR - (13,433)
Increase (decrease) in operating liabilities:
Administrative expenses payable 8,864 17,106
Accrued management fee (1,029) (2,231)
Incentive fee payable - (173,722)
Net cash provided by (used for) operating activities 54,721
(308,300)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in redemptions payable 210,930 48,537
Redemptions of units (453,100) (96,338)
Net cash used for financing activities (242,170) (47,801)
Net decrease in cash (187,449) (356,101)
Balance at beginning of period 9,719,676 9,092,300
Balance at end of period 9,532,227 8,736,199
<FN>
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements include, in the opinion of management,
all adjustments necessary for a fair presentation of the results
of operations and financial condition of Columbia Futures Fund
(the "Partnership"). The financial statements and condensed
notes herein should be read in conjunction with the Partnership's
December 31, 1998 Annual Report on Form 10-K.
1. Organization
Columbia Futures Fund is a limited partnership organized to
engage in the speculative trading of futures contracts and
forward contracts in foreign currencies, financial instruments
and other commodity interests (collectively, "futures
interests"). The Partnership commenced trading on July 15, 1983.
The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Dean Witter
Reynolds Inc. ("DWR") and an unaffiliated clearing commodity
broker, Carr Futures Inc. ("Carr"), provides clearing and
execution services. Both Demeter and DWR are wholly-owned
subsidiaries of Morgan Stanley Dean Witter & Co. ("MSDW"). The
sole trading advisor to the Partnership is John W. Henry &
Company, Inc. (or the "Trading Advisor").
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. Related Party Transactions
The Partnership's cash is on deposit with DWR and Carr in futures
interests trading accounts to meet margin requirements as needed.
DWR pays interest on these funds based on current 13-week U.S.
Treasury bill rates. The Partnership pays brokerage commissions
to DWR.
3. Financial Instruments
The Partnership trades futures contracts and forward contracts in
foreign currencies, financial instruments and other commodity
interests. Futures and forwards represent contracts for delayed
delivery of an instrument at a specified date and price. Risk
arises from changes in the value of these contracts and the
potential inability of counterparties to perform under the terms
of the contracts. There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
effective for fiscal years beginning after June 15, 1999. The
Partnership has elected to adopt the provisions of SFAS No. 133
beginning with the fiscal year ended December 31, 1998. SFAS No.
133 supersedes SFAS No. 119 and No. 105, which required the
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
disclosure of average aggregate fair values and contract/notional
values, respectively, of derivative financial instruments for an
entity which carries its assets at fair value. The application
of SFAS No. 133 does not have a significant effect on the
Partnership's financial statements.
The net unrealized gain on open contracts is reported as a
component of "Equity in futures interests trading accounts" on
the Statements of Financial Condition and totaled $385,047 and
$499,104 at March 31, 1999 and December 31, 1998, respectively.
Of the $385,047 net unrealized gain on open contracts at March
31, 1999, $249,612 related to exchange-traded futures contracts
and $135,435 related to off-exchange-traded forward currency
contracts.
Of the $499,104 net unrealized gain on open contracts at December
31, 1998, $694,869 related to exchange-traded futures contracts
and $(195,765) related to off-exchange-traded forward currency
contracts.
Exchange-traded futures contracts held by the Partnership at
March 31, 1999 and December 31, 1998 mature through March 2000
and September 1999, respectively. Off-exchange-traded forward
currency contracts held by the Partnership at March 31, 1999 and
December
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
31, 1998 mature through June 1999 and March 1999, respectively.
The Partnership is subject to the credit risk associated with
counterparty non-performance. The credit risk associated with
the instruments in which the Partnership is involved is limited
to the amounts reflected in the Partnership's Statements of
Financial Condition. DWR and Carr act as the futures commission
merchants or the counterparties with respect to most of the
Partnership's assets. Exchange-traded futures contracts are
marked to market on a daily basis, with variations in value
settled on a daily basis. Each of DWR and Carr, as a futures
commission merchant for all of the Partnership's exchange-traded
futures contracts, are required, pursuant to regulations of the
Commodity Futures Trading Commission ("CFTC") to segregate from
their own assets, and for the sole benefit of their commodity
customers, all funds held by them with respect to exchange-traded
futures contracts, including an amount equal to the net
unrealized gain on all open futures contracts, which funds, in
the aggregate, totaled $9,781,839 and $10,414,545 at March 31,
1999 and December 31, 1998, respectively.
With respect to the Partnership's off-exchange-traded forward
currency contracts, there are no daily settlements of variations
in value nor is there any requirement that an amount equal to the
net unrealized gain on open forward contracts be segregated.
With
<PAGE>
COLUMBIA FUTURES FUND
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
respect to those off-exchange-traded forward currency contracts,
the Partnership is at risk to the ability of Carr, the sole
counterparty on all of such contracts, to perform. Carr's
parent, Credit Agricole Indosuez, has guaranteed to the
Partnership payment of the net liquidating value of the
transactions in the Partnership's account with Carr (including
foreign currency contracts).
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity - Assets of the Partnership are deposited with DWR as
non-clearing broker and Carr as clearing broker in separate
futures interest trading accounts. Such assets are held in either
non-interest bearing bank accounts or in securities approved by
the CFTC for investment of customer funds. The Partnership's
assets held by DWR and Carr may be used as margin solely for the
Partnership's trading. Since the Partnership's sole purpose is
to trade in futures interests, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.
The Partnership's investment in futures interests may, from
time to time, be illiquid. Most United States futures exchanges
limit fluctuations in certain futures interest prices during a
single day by regulations referred to as "daily price
fluctuations limits" or "daily limits". Pursuant to such
regulations, during a single trading day no trades may be
executed at prices beyond the daily limit. If the price for a
particular futures interest has increased or decreased by an
amount equal to the daily limit, positions in such futures
interest can neither be taken nor liquidated unless traders are
willing to effect trades at or within the limit. Futures
interests prices have occasionally moved the daily limit for
several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly
liquidating its futures interests and result in restrictions on
redemptions.
<PAGE>
There is no limitation on daily price moves in trading
forward contracts on foreign currency. The markets for some
world currencies have low trading volume and are illiquid, which
may prevent the Partnership from trading in potentially
profitable markets or from promptly liquidating unfavorable
positions, subjecting it to substantial losses. Either of these
market conditions could result in restrictions on redemptions.
Capital Resources. The Partnership does not have, nor does it
expect to have, any capital assets. Future redemptions of Units
of Limited Partnership Interest ("Unit(s)") will affect the
amount of funds available for investment in futures interests in
subsequent periods. Since they are at the discretion of Limited
Partners, it is not possible to estimate the amount and
therefore, the impact of future redemptions.
Results of Operations
For the Quarter Ended March 31, 1999
For the quarter ended March 31, 1999, the Partnership recorded
total trading revenues including interest income of $145,616 and,
after expenses, posted a decrease in Net Asset Value per Unit.
The most significant losses were recorded in the global interest
rate futures markets from short Japanese government bond futures
positions as prices increased amid a sell-off in global stock
markets during mid-January and a "flight-to-quality" due to the
renewed financial market turmoil in Brazil. Losses were also
recorded from long Japanese government bond futures positions as
<PAGE>
prices dropped during mid-March as bond yields rose following
comments by Bank of Japan Governor Masaru Hayami that he expected
interest rates in Japan to rise over time. In the metals
markets, losses were experienced from long silver futures
positions as prices declined during mid-March after Berkshire
Hathaway's annual report failed to provide any new information on
the company's silver positions. In soft commodities, losses were
recorded from short coffee futures positions as prices surged in
late-March as options-related buying triggered waves of buy-stops
at several key resistance levels, attracting fund short-covering.
These losses were partially offset by gains recorded in the
currency markets during February and March from short euro
positions as the value of the U.S. dollar hit new highs versus
the European common currency on the strength of the U.S. economy,
concerns pertaining to the economic health of Europe and Japan
and growing uncertainty about the military action in Yugoslavia.
In the energy markets, gains were recorded from long crude oil
futures positions as oil prices moved significantly higher amid a
substantial recovery in oil prices during March that was largely
attributed to the news that both OPEC and non-OPEC countries had
reached an agreement to cut total output by approximately two
million barrels a day beginning April 1st. Total expenses for the
three months ended March 31, 1999 were $212,020, resulting in a
net loss of $66,404. The value of a Unit decreased from
$3,170.99 at December 31, 1998 to $3,150.84 at March 31, 1999.
<PAGE>
For the Quarter Ended March 31, 1998
For the quarter ended March 31, 1998, the Partnership recorded
total trading losses net of interest income of $254,058 and
posted a decrease in Net Asset Value per Unit. The most
significant of these losses were recorded in the currency markets
from short Japanese yen positions as the value of the yen
increased versus the U.S. dollar during January and early
February. These losses more than offset currency gains from
short positions in the Swiss franc and German mark as the U.S.
dollar strengthened versus these currencies during March.
Additional losses were recorded from trading the South African
rand and Australian dollar as their values moved without
consistent direction during the quarter. In metals, losses were
recorded from trading gold futures as prices in this market moved
in a trendless pattern throughout a majority of the quarter.
Additional losses were recorded from long positions in silver
futures as silver prices moved sharply lower during March after
rallying higher previously. In agriculturals, losses were
experienced from short corn futures positions as prices moved
higher in January and March. In financial futures, losses were
experienced from trading Nikkei index futures during January and
March, as well as from trading Japanese government bond futures
throughout the quarter. A portion of these losses was offset by
gains recorded from short positions in crude oil futures as oil
prices moved lower throughout a majority of the quarter despite a
potential conflict in the Persian Gulf during February. Total
expenses for the three months ended March 31, 1998 were $193,632,
<PAGE>
resulting in a net loss of $447,690. The value of a Unit
decreased from $2,830.91 at December 31, 1997 to $2,696.76 at
March 31, 1998.
Year 2000 Problem. Commodity pools, like financial and business
organizations and individuals around the world, depend on the
smooth functioning of computer systems. Many computer systems in
use today cannot recognize the computer code for the year 2000,
but revert to 1900 or some other date. This is commonly known as
the "Year 2000 Problem". The Partnership could be adversely
affected if computer systems used by it or any third party with
whom it has a material relationship do not properly process and
calculate date-related information and data concerning dates on
or after January 1, 2000. Such a failure could adversely affect
the handling or determination of futures trades and prices and
other services.
MSDW began its planning for the Year 2000 Problem in 1995,
and currently has several hundred employees working on the
matter. It has developed its own Year 2000 compliance plan to
deal with the problem and had the plan approved by the company's
executive management, Board of Directors and Information
Technology Department. Demeter is coordinating with MSDW to
address the Year 2000 Problem with respect to Demeter's computer
systems that affect the Partnership. This includes hardware and
software upgrades, systems consulting and computer maintenance.
Beyond the challenge facing internal computer systems, the
systems failure of any of the third parties with whom the
Partnership has a material relationship - the futures exchanges
<PAGE>
and clearing organizations through which it trades, Carr, or the
Trading Advisor - could result in a material financial risk to
the Partnership. All U.S. futures exchanges are subject to
monitoring by the CFTC of their Year 2000 preparedness and the
major foreign futures exchanges are also expected to be subject
to market-wide testing of their Year 2000 compliance during 1999.
Demeter intends to monitor the progress of Carr and the Trading
Advisor throughout 1999 in their Year 2000 compliance and, where
applicable, to test its external interface with Carr and the
Trading Advisor.
A worst case scenario would be one in which trading of
contracts on behalf of the Partnership becomes impossible as a
result of the Year 2000 problem encountered by any third parties.
A less catastrophic but more likely scenario would be one in
which trading opportunities diminish as a result of technical
problems resulting in illiquidity and fewer opportunities to make
profitable trades. MSDW has begun developing various "contingency
plans" in the event that the systems of such third parties fail.
Demeter intends to consult closely with MSDW in implementing
those plans. Despite the best efforts of both Demeter and MSDW,
however, it is possible that these steps will not be sufficient
to avoid any adverse impact to the Partnership.
Risks Associated With the Euro. On January 1, 1999, eleven
countries in the European Union established fixed conversion
rates on their existing sovereign currencies and converted to a
common single currency (the "euro"). During a three-year
transition period, the sovereign currencies will continue to
<PAGE>
exist but only as a fixed denomination of the euro. Conversion
to the euro prevents the Trading Advisor from trading in certain
currencies and thereby limits its ability to take advantage of
potential market opportunities that might otherwise have existed
had separate currencies been available to trade. This could
adversely affect the performance results of the Partnership.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures interests. The market sensitive
instruments held by the Partnership are acquired solely for
speculative trading purposes and, as a result, all or
substantially all of the Partnership's assets are subject to the
risk of trading loss. Unlike an operating company, the risk of
market sensitive instruments is integral, not incidental, to the
Partnership's primary business activities.
The futures interests traded by the Partnership involve varying
degrees of related market risk. Such market risk is often
dependent upon changes in the level or volatility of interest
rates, exchange rates, and/or market values of financial
instruments and commodities. Fluctuations in related market risk
based upon the aforementioned factors result in frequent changes
in the fair value of the Partnership's open positions, and,
consequently, in its earnings and cash flow.
<PAGE>
The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification effects among
the Partnership's existing open positions, the volatility present
within the market(s), and the liquidity of the market(s). At
varying times, each of these factors may act to exacerbate or
mute the market risk associated with the Partnership.
The Partnership's past performance is not necessarily indicative
of its future results. Any attempt at quantifying the
Partnership's market risk must be qualified by the inherent
uncertainty of its speculative trading, which may cause future
losses and volatility (i.e. "risk of ruin") far in excess of the
Partnership's experience to date and/or any reasonable
expectation premised upon historical changes in the fair value of
its market sensitive instruments.
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the Partner-
ship's market risk exposures contain "forward-looking statements"
within the meaning of the safe harbor from civil liability
provided for such statements by the Private Securities Litigation
Reform Act of 1995 (set forth in Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934). All quantitative disclosures in this section are deemed
to be forward-looking statements for purposes of the safe harbor,
except for statements of historical fact.
<PAGE>
The Partnership accounts for open positions on the basis of mark-
to-market accounting principles. As such, any loss in the fair
value of the Partnership's open positions is directly reflected
in the Partnership's earnings, whether realized or unrealized,
and the Partnership's cash flow, as profits and losses on open
positions of exchange-traded futures interests are settled daily
through variation margin.
The Partnership's risk exposure in the various market sectors
traded by the Trading Advisor is estimated below in terms of
Value at Risk ("VaR"). The VaR model employed by the Partnership
incorporates numerous variables that could impact the fair value
of the Partnership's trading portfolio. The Partnership
estimates VaR using a model based on historical simulation with a
confidence level of 99%. Historical simulation involves
constructing a distribution of hypothetical daily changes in
trading portfolio value. The VaR model generally takes into
account linear exposures to price and interest rate risk. Market
risks that are incorporated in the VaR model include equity and
commodity prices, interest rates, foreign exchange rates, as well
as correlation that exists among these variables. The
hypothetical changes in portfolio value are based on daily
observed percentage changes in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive. In the case of the Partnership's VaR, the historical
observation period is approximately four years. The
Partnership's one-day 99% VaR corresponds to the negative change
in portfolio value that, based
<PAGE>
on observed market risk factor moves, would have been exceeded
once in 100 trading days.
VaR models such as the Partnership's are continually evolving as
trading portfolios become more diverse and modeling techniques
and systems capabilities improve. It must also be noted that the
VaR model is used to quantify market risk for historic reporting
purposes only and is not utilized by either Demeter or the
Trading Advisor in their daily risk management activities.
The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by market category as of March 31, 1999. As of March 31, 1999,
the Partnership's total capitalization was approximately $10
million.
Primary Market March 31, 1999
Risk Category Value at Risk
Interest Rate (0.83)%
Currency (3.00)
Equity (0.36)
Commodity (0.49)
Aggregate Value at Risk (3.01)%
<PAGE>
Aggregate value at risk represents the aggregate VaR of the
Partnership's open positions and not the sum of the VaR of the
individual categories listed above. Aggregate VaR will be lower
as it takes into account correlation among different positions
and categories.
The table above represents the VaR of the Partnership's open
positions at March 31, 1999 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. As the Partnership's sole
business is the speculative trading of primarily futures
interests, the composition of its portfolio of open positions can
change significantly over any given time period or even within a
single trading day. Such changes in open positions could
materially impact market risk as measured by VaR either
positively or negatively.
The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR as a percentage of total
net assets for the four quarterly reporting periods from April 1,
1998 through March 31, 1999.
Primary Market Risk Category High Low Average
Interest Rate (0.83)% (0.60)% (0.72)%
Currency (3.00) (1.07) (2.03)
Equity (0.36) (0.22) (0.28)
Commodity (0.58) (0.49) (0.52)
Aggregate Value at Risk (3.01)% (1.47)% (2.22)%
<PAGE>
Limitations on Value at Risk as an Assessment of Market Risk
The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin require-
ments, as such margin requirements generally range between 2% and
15% of contract face value. Additionally, due to the use of
leverage, the face value of the market sector instruments held by
the Partnership is typically many times the total capitalization
of the Partnership. The financial magnitude of the Partnership's
open positions thus creates a "risk of ruin" not typically found
in other investment vehicles. Due to the relative size of the
positions held, certain market conditions may cause the
Partnership to incur losses greatly in excess of VaR within a
short period of time. The foregoing VaR tables, as well as the
past performance of the Partnership, gives no indication of such
"risk of ruin". In addition, VaR risk measures should be
interpreted in light of the methodology's limitations, which
include the following: past changes in market risk factors will
not always yield accurate predictions of the distributions and
correlations of future market movements; changes in portfolio
value in response to market movements may differ from the
responses implicit in a VaR model; published VaR results reflect
past trading positions while future risk depends on future
positions; VaR using a one-day time horizon does not fully
capture the market risk of positions that cannot be liquidated or
hedged within one day; and the historical market risk factor data
used for VaR estimation may provide only limited insight into
losses that could be incurred under certain unusual market
movements.
<PAGE>
The foregoing VaR tables present the results of the Partnership's
VaR for the Partnership's market risk exposures and on an
aggregate basis at March 31, 1999 and for the end of the four
quarterly reporting periods from April 1, 1998 through March 31,
1999. Since VaR is based on historical data, VaR should not be
viewed as predictive of the Partnership's future financial
performance or its ability to manage and monitor risk and there
can be no assurance that the Partnership's actual losses on a
particular day will not exceed the VaR amounts indicated or that
such losses will not occur more than 1 in 100 trading days.
Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin. However, such balances, as well
as any market risk they may represent, are immaterial. The
Partnership also maintains a substantial portion (approximately
90%) of its available assets in cash at DWR. A decline in short-
term interest rates will result in a decline in the Partnership's
cash management income. This cash flow risk is not considered
material.
Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and the
potential losses caused by such movements, taking into account
the leverage, optionality and multiplier features of the
Partnership's market sensitive instruments.
<PAGE>
Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (i) those disclosures that are
statements of historical fact and (ii) the descriptions of how
the Partnership manages its primary market risk exposures -
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. The Partnership's primary market risk
exposures as well as the strategies used and to be used by
Demeter and the Trading Advisor for managing such exposures are
subject to numerous uncertainties, contingencies and risks, any
one of which could cause the actual results of the Partnership's
risk controls to differ materially from the objectives of such
strategies. Government interventions, defaults and
expropriations, illiquid markets, the emergence of dominant
fundamental factors, political upheavals, changes in historical
price relationships, an influx of new market participants,
increased regulation and many other factors could result in
material losses as well as in material changes to the risk
exposures and the risk management strategies of the Partnership.
Investors must be prepared to lose all or substantially all of
their investment in the Partnership.
The following were the primary trading risk exposures of the
Partnership as of March 31, 1999, by market sector. It may be
anticipated however, that these market exposures will vary
materially over time.
<PAGE>
Interest Rate. Interest rate risk is the principal market
exposure of the Partnership. Interest rate movements directly
affect the price of the sovereign bond futures positions held by
the Partnership and, indirectly, the value of its stock index and
currency positions. Interest rate movements in one country as
well as relative interest rate movements between countries
materially impact the Partnership's profitability. The
Partnership's primary interest rate exposure is to interest rate
fluctuations in the United States and the other G-7 countries.
However, the Partnership also takes futures positions in the
government debt of smaller nations - e.g. Australia. Demeter
anticipates that G-7 interest rates will remain the primary
market exposure of the Partnership for the foreseeable future.
The changes in interest rates which have the most effect on the
Partnership are changes in long-term, as opposed to short-term,
rates. Most of the speculative future positions held by the
Partnership are in medium-to-long term instruments.
Consequently, even a material change in short-term rates would
have little effect on the Partnership were the medium-to-long
term rates to remain steady.
Currency. The Partnership's currency exposure is to
exchange rate fluctuations, primarily fluctuations which disrupt
the historical pricing relationships between different currencies
and currency pairs. These fluctuations are influenced by
interest rate changes as well as political and general economic
conditions. The Partnership's major exposures have typically been
<PAGE>
in the dollar/euro, dollar/yen and dollar/pound positions.
Demeter does not anticipate that the risk profile of the
Partnership's currency sector will change significantly in the
future, although it is difficult at this point to predict the
effect of the introduction of the Euro on the Trading Advisors'
currency trading strategies.
Equity. The Partnership's primary equity exposure is to
equity price risk in the G-7 countries. The stock index futures
traded by the Partnership are by law limited to futures on
broadly based indices. As of March 31, 1999, the Partnership's
primary exposures were in the ASE (Australia) and Nikkei (Japan)
stock indices. The Partnership is primarily exposed to the risk
of adverse price trends or static markets in the major U.S.,
European and Japanese indices. (Static markets would not cause
major market changes but would make it difficult for the
Partnership to avoid being "whipsawed" into numerous small
losses).
Commodity.
Metals. The Partnership's primary metals market exposure
is to fluctuations in the price of gold and silver. Although the
Trading Advisor will from time to time trade base metals such as
copper, the principal market exposures of the Partnership have
consistently been in the precious metals, gold and silver. The
Trading Advisor's gold trading has been increasingly limited due
to the long-lasting and mainly non-volatile decline in the price
<PAGE>
of gold over the last 10-15 years. However, silver prices have
remained volatile over this period, and the Trading Advisor has
from time to time taken substantial positions as they have
perceived market opportunities to develop. Demeter anticipates
that gold and silver will remain the primary metals market
exposure for the Partnership.
Soft Commodities and Agriculturals. The Partnership's
primary commodities exposure is to fluctuations in the price of
soft commodities and agriculturals, which are often directly
affected by severe or unexpected weather conditions. Coffee,
corn and sugar accounted for the substantial bulk of the
Partnership's commodities exposure as of March 31, 1999. The
Partnership has market exposure to live cattle. However, Demeter
anticipates that the Trading Advisor will maintain an emphasis on
coffee, corn and sugar, in which the Partnership has historically
taken it's largest positions.
Energy. The Partnership's primary energy market exposure is
to oil price movements, often resulting from political
developments in the Middle East. Oil prices are currently
depressed, but they can be volatile and substantial profits and
losses have been and are expected to continue to be experienced
in this market.
Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership as of March 31, 1999:
<PAGE>
Foreign Currency Balances. The Partnership's primary foreign
currency balances are in euros, Japanese yen, British pounds,
Singapore dollars and Swiss francs. The Partnership controls the
non-trading risk of these balances by regularly converting these
balances back into U.S. dollars at varying intervals, depending
upon such factors as size, volatility, etc.
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The means by which the Partnership and the Trading Advisor,
severally, attempt to manage the risk of the Partnership's open
positions are essentially the same in all market categories
traded. Demeter attempts to manage the Partnership's market
exposure by (i) diversifying the Partnership's assets among
different market sectors and trading approaches, and (ii),
monitoring the performance of the Trading Advisor on a daily
basis. In addition, the Trading Advisor establishes
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market sensitive instrument.
Demeter monitors and controls the risk of the Partnership's non-
trading instruments, cash, which is the only Partnership
investment directed by Demeter, rather than the Trading Advisor.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The following supplements Legal Proceedings previously disclosed
in Item 3. of the Partnership's 1998 Form 10-K:
On April 12, 1999, the defendants filed a motion in the
California action to oppose certification by the court of the
class in the California litigation.
With respect to JWH, the New York Supreme Court complaint was
dismissed with prejudice when the plaintiffs failed to replead
against JWH in December, 1998. Further, JWH has been dismissed
as a defendant in the California actions without prejudice
pursuant to a tolling agreement with plaintiffs executed in
January, 1999.
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits - None.
B) Reports on Form 8-K. - None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Columbia Futures Fund
(Registrant)
By: Demeter Management Corporation
(General Partner)
May 14, 1999 By:/s/ Lewis A. Raibley, III
Lewis A. Raibley, III
Director and Chief Financial
Officer
The General Partner which signed the above is the only party
authorized to act for the Registrant. The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Columbia Futures Fund and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 9,532,227
<SECURITIES> 0
<RECEIVABLES> 30,669<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,947,943<F2>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,947,943<F3>
<SALES> 0
<TOTAL-REVENUES> 145,616<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 212,020
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (66,404)
<INCOME-TAX> 0
<INCOME-CONTINUING> (66,404)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,404)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include interest receivable of $30,669.
<F2>In addition to cash and receivables, total assets include net
unrealized gain on open contracts of $385,047.
<F3>Liabilities include redemptions payable of $226,785, accrued
management fee of $32,839 and administrative expenses payable of
$63,254.
<F4>Total revenues include realized trading revenue of $170,922,
net change in unrealized of $(114,057) and interest income of $88,751.
</FN>
</TABLE>
